Euro slumps as German outlook worsens

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The Euro slumped against the Dollar for the third day in a row today, following the announcements of negative economic sentiments from Germany’s ZEW institute yesterday, combined with low inflation figures in Italy and investors piling bets against the Euro.

The Euro reached a nine month low as of Tuesday, and declined by a further 0.13% against the Dollar as of Wednesday morning.

The German ZEW institute reported a strong slide of economic expectations for the German economy, with the ZEW index falling by 18.5 points to 8.6, representing the sharpest drop since December 2012.

At the same time, Italy’s CPI declined by 0.1%, adding to fears of deflation for the European periphery.

According to the latest BofA Merrill Lynch survey conducted among 224 panellists, only 10 of asset allocators are currently indicating to go overweight on Europe, 40% are expecting that the Euro will further depreciate.

In addition, investors have increasingly bought shorts against the Euro, which are currently at the highest level since 2012. This is in line with Mario Draghi’s latest policy plans. During a press conference last week, Draghi highlighted the potential positive effect of a weak Euro on European inflation figures.

However, there are also signs that bets against the Euro may have reached a peak. Investors bets on a decline of the Euro exceeded issuers of shorts by 128.747 contracts, according to the latest data released by the Commodity Futures Trading Commission (CFTC) for the week ending 5 August.

Mona Dohle
Mona Dohle speaks German and Dutch, she is DACH & Benelux Correspondent for InvestmentEurope. Prior to that, she worked as a journalist in Egypt and Palestine. She started her career as a journalist working for a local German newspaper. Mona graduated with an MSc in Development Studies from SOAS and has completed the CISI Certificate in International Wealth and Investment Management.

Read more from Mona Dohle

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